India is committed to taking "hard and difficult" decisions in the long-term interest of the economy, Prime Minister Manmohan Singh said today, while assuring Japanese industry that the long-awaited Goods and Services Tax (GST) regime facing hurdles from states will be in place in an "appropriate type" by 2014.
On a mission to woo Japanese investors, Singh told leading business honchos at the Keidanren, the premier chamber of commerce and industry, that the present bilateral trade of USD 18 billion does no justice to the enormous potential that exists between the two countries.
The Prime Minister faced some searching questions from the Japanese industry which sought improvement in tax regimes, further easing of priority sector lending rules to expand financial services and allowing opening of foreign bank branches in metropolitan cities.
"Our people have tasted the benefits of rapid growth and they will not settle for less. I want to assure you that our government is committed to take hard and difficult decisions in the long term interest of our economy," he said.
A top official of Mitsubishi corporation said Japanese investors faced difficulties with different tax regimes in each Indian state leading to complications and wanted to know the timeline by when GST regime will be implemented.
"India is a federation and there are difficulties to bring states to agree to surrender tax power but I am confident we will overcome the hurdle. We will work and we have been working to persuade more and more states to fall in line but it does require amendment of the Constitution and needs much more energetic efforts than an ordinary piece of legislation," Singh said.
The GST has been facing opposition from several non- Congress states which have accused the Centre of trying to encroach on powers of the states and that such a move would hit their finances.
"So, I cannot say we can deliver tomorrow but if you ask me by 2014 once elections are out of the way, whichever government is there will be a general agreement of appropriate type in place to help propel India's growth story," he said.
The Prime Minister said as a result of a number of steps to revive the Indian economy, Government expects the growth rate in the current fiscal (2013-14) to be much better than in the previous year, hopefully around six per cent or so.
The chairman of Keidanren, Hiromasa Yonekura, said Japanese investors are very keen to promote private-public partnership but were facing hurdles because of the complicated tax regimes in India, drawing an assurance from Singh that his government was determined to overcome these hurdles to enable the country return to the growth path of eight per cent.
On easing norms for Priority Sector Lendings (PSL), the economist Prime Minister said it was a "tough technical question which was the preserve of the Finance Ministry and the RBI" and then went on to add in a lighter vein, "the higher we go, the less you know about lower levels".
The Prime Minister said the Western Dedicated Freight Corridor between Delhi and Mumbai was scheduled for completion as planned in 2017.
The procurement of civil works for Phase-I is in an advanced stage and construction is to begin soon. The engineering service consultants for Phase-ll of the DFC project are already in position, he said, hoping that Japanese companies will participate strongly in both phases.
He said the Delhi-Mumbai Industrial Corridor (DMIC) was also making good progress and had moved from the planning to the implementation stage. A number of priority projects for implementation from the first tranche of USD 4.5 billion provided by Japan for the DMIC have been listed.
"We have resolved the issues of priority sector lending treatment to DMIC projects. Restrictions on foreign currency borrowings have been relaxed. I understand a few problems remain relating to long term swap arrangements. We are willing to consider innovative suggestions to resolve these problems," he said, adding Japanese banks are being given licenses to open branches in metropolitan areas.
Japan has also offered financial and technical support for a detailed project report for the Mumbai-Ahmedabad High Speed Railway Route.
"This is an ambitious project and we will need to take a holistic view, based on our infrastructure needs, commercial viability, overall national priorities and the availability of financial resources," he said.
Referring to the Chennai-Bangalore Industrial Corridor, he said it provided another focus for expanded Japanese industrial cooperation in future.
He said a preliminary study for a comprehensive integrated master plan for this corridor has been completed and the second phase of the project was about to commence.
Noting that the two countries have been engaged in an energy dialogue to address some of the challenges in energy security, including the issue of access to assured, reliable, secure and affordable supply of hydrocarbons, Singh said Japanese investments in India in the areas of solar power generation, clean coal technologies and upgrading of brown coal would be welcomed.
Singh said while it will be easier for foreign banks to adjust to PSL norms, his government would evolve transitional methods to provide a hospitable climate for the Japanese industry and ensure its larger presence in the country.
Describing Japan as a "major player" in the modernisation of Indian industry in the period after economic reforms, he noted that the Maruti-Suzuki partnership has become a household name in India.
Singh, who arrived here yesterday on a three-day visit, said lack of quality infrastructure was the single biggest obstacle to achieving high levels of competitiveness in India.
He said government has targeted an investment of around one trillion USD in infrastructure over the 12th plan period, with half of it coming from the private sector and public-private partnership.
"I hope Japanese business will pick up a large share of the investment opportunities that India offers," he said.